It could cost Alberta $2 billion to compensate power generators for shuttering coal-fired electricity plants across the province.

And “top-up” subsidies to help ramp up renewable energy production in Alberta could also soar to around $10 billion in the decades ahead.

These estimates were put forward by Capital Power Corp. chief executive Brian Vaasjo in a presentation this week at the Alberta Power Symposium in Calgary.

The take-away is it’s going to cost a whack of money to remove coal from Alberta’s power system — a move designed to lower greenhouse gas emissions, green the grid and provide health benefits to the public.

But the price for failing to compensate owners for their “stranded assets” could also be high if the private sector doesn’t have confidence investing in Alberta’s electricity system, he warned.

And that’s why the government must strike the right policy-making balance in the months ahead, protecting the public purse while ensuring new electricity generation is properly brought into the market.

In the coming years, the province hopes to attract at least $10.5 billion in renewable energy developments and pull in billions more for natural gas facilities to replace coal power by 2030.

“There is a cost to stranding investment due to policy change and today we are at a low point in investor confidence, for sure,” Vaasjo told the audience Wednesday. “Fair compensation, in the eyes of our investors, will re-establish confidence.”

The issue of compensating the owners of Alberta coal-fired power plants has been boiling for months since the Notley government announced it will phase out coal electricity by 2030.

Six facilities were expected to operate well beyond that timetable.

Two newer ones built after 2000 were anticipated to operate past 2050. Edmonton-based Capital Power holds an ownership stake in four of these plants.

“Compensation for the closure of (all industry) coals plants could be a one-time cost of somewhere in the order of $2 billion,” Vaasjo told the conference.

The money logically could come from the provincewide carbon tax the government will introduce next year, so it wouldn’t be added on to consumers’ electricity bills.

As for Capital Power’s own coal plants, “the starting point of compensation for us — based on looking at the book values of the assets we’re talking about— (is) starting at about $1 billion,” Vaasjo said in an interview.

The government hasn’t telegraphed what the payouts might be, saying only it’s striving to avoid unnecessarily stranding investors’ capital.

But former Balancing Pool head and electricity consultant Gary Reynolds said $2 billion is a reasonable estimate.

“You can’t just leave them high and dry because of the government’s decision to change policy.”

However, the Pembina Institute has argued against compensation.

It maintains owners of older plants have already been paid out or will reach that point within 14 years. Developers of newer facilities knew the risks of building coal-fired electricity generation in a carbon-constrained world, the environmental think-tank contends.

On the other side, companies like Enmax Corp., TransAlta Corp. and Capital Power — as well as smaller players — are weighing whether to plunk shareholder money into natural gas, solar and wind generation developments in the province.

For example, Capital Power is considering spending $1.4 billion with Enmax to build two new natural gas power generating units in Alberta.

“There is absolutely no chance that we would be making investments in this province if we don’t get a reasonable level of compensation associated with our stranded assets,” Vaasjo said.

The province has hired a negotiator, industry veteran Terry Boston, to submit a report on the issue by the end of September.

Energy Minister Marg McCuaig-Boyd said the government will make decisions based on Boston’s advice, “including whether compensation should be provided, how much and the source of the funds.”

It’s a delicate, high-stakes negotiation for all sides.

The electricity market in Alberta has been turned on its head in the past year, with prices plunging to two-decade lows, the government moving to introduce a carbon tax and its plan to phase out coal power.

Power purchase arrangements have been turned back to the Balancing Pool, a government entity, while the province is headed to court to stop that from happening.

Environment Minister Shannon Phillips set a firm target this week that 30 per cent of all electricity used in Alberta by 2030 will come from renewable energy sources such as wind, solar and hydro.

These developments will require significant public subsidies, although Phillips isn’t saying yet how much it will cost or the structure of the incentives.

In his speech, Vaasjo noted the province’s climate change panel recommended offering minimum subsidies that offer a top-up to “bridge the gap” between expected power prices and the cost to build renewable projects.

“So what is the cost? In our view, the top-up approach for 4,200 megawatts of renewables will be approximately $9 billion,” he said, noting the number would climb to about $10 billion over three decades to reach the province’s new target of 5,000 megawatts.

“The peak costs in the middle of the next decade would be about $600 million on an annual basis.”

Anyway you add it up, it’s a lot of public money at play.

Despite all these moving parts, Vaasjo insists he’s comfortable with the direction the government is going on this energy transformation — as long as it gets the investment climate right.

And that’s the billion-dollar question hanging over Alberta’s evolving power market today.

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